Filed Rates

Filed Rates – Approved Pricing With State Regulators

In plain language: When we say "filed rates," we're talking about the prices that an insurance company has officially told the state government it will charge for its insurance policies.

Technical definition: Filed rates refer to the pricing, or rates, that an insurance company has submitted to a state's insurance regulatory board for approval. This filing typically comprises part of the broader policy form and the rates are applied to insurance policies once they are approved.

Misunderstandings about filed rates can lead to overpriced policies or inadequate coverage. One of an insurance professional's key tasks is helping clients understand these rates.

TL;DR

Filed rates are the pricing structures that insurance companies submit for state approval.

Understanding them can help agents guide their clients to get the right plan at the right price.

A common misunderstanding is that these are non-negotiable prices, which could lead to clients overpaying.

A quick win for agencies is gaining the ability to leverage knowledge of filed rates in lieu of tax preparation for their clients' advantage.

What Is Filed in Insurance?

When discussing filed rates in the insurance industry, we are referring to the prices insurers have officially lodged with the state's regulatory authorities for each of their policies. These rates become the official record which the insurer must adhere to when selling these policies — much like how tax filing becomes an official documentation of income tax you owe.

This filing plays a significant part in the insurance policy kit, which is why recognizing their effects and how they interplay with other insurance provisions is of utmost importance. State regulatory boards commonly review these filings and must grant approval before the rates can be used. While regulations vary by state, the rates remain largely consistent across a specific insurer's offerings, with variations due to policy specifics. These filed rates can actually end up being much like a tax preparation you treat with your CPA firms, a complex but crucial component to understand.

Key Related Terms to Know

Insurance Rates – The cost of a specific amount of insurance coverage

Rate Filing – The document submitted by an insurer to a state regulatory board, including the proposed premiums for various policies

State Regulatory Board – The entity responsible for overseeing and approving the filed rates by insurers in a given state

Approved Rates – The pricing permitted by the state after reviewing an insurance company's submitted rate filing

Common Questions About Filed

How do insurers determine filed rates?

Insurers consider numerous factors in determining rates to be filed. These include the type of coverage, statistical analysis of loss trends, and the insurer's required profit margin. Just like how accounting software helps tax professionals calculate accurate tax dues, insurers use complex actuarial software to determine the rates they file.

Why do insurance companies have to file their rates?

Insurance is a regulated industry. Filing rates with the state ensures that premiums are fair and based on sound actuarial principles. It's akin to how legal documents are needed to certify a company's operations – it's a necessary step in ensuring compliance.

How often are rates filed?

There's no universal rule for how often rates are filed. It can depend on numerous factors, including changes in loss trends, regulatory requirements, and an insurer's strategic goals.

Can agents negotiate filed rates with insurers?

Agents may have limited room to negotiate rates. Depending on state regulations and specific circumstances, agents may be able to secure discounts or additional coverages.

Filed vs. Approved Rates

There are two critical steps in the pricing of insurance policies: filing rates and getting those rates approved.

Comparison Area	Filed Rates	Approved Rates
Primary use case	Proposing premiums for insurance policies	Offering insurance policies at regulatory-approved prices
Coverage / concept type	Part of the policy kit submitted by the insurer	Outcome of the regulatory review of the filed rates
Typical exclusions	Filed rates don't include any possible discounts or bonuses	Approved rates exclude proposed prices that the regulatory board deems unfair
Who is most affected by errors	Insurers risk non-approval of rates if not properly filed	Consumers, who are subject to the final pricing
Common mistakes	Not accounting for all factors leading to losses in proposed rates	Assuming approved rates are non-negotiable

Real Claim Examples Involving Filed

Scenario 1: A client had a unique coverage need that wasn't addressed in the insurer's filed rates. The agent who was able to secure an endorsement addressing this, by working within the bounds of the approved rates, made a huge difference to the coverage and client satisfaction.

Scenario 2: A client failed to understand her home insurance's filed rates and assumed they were non-negotiable. It wasn't until an independent agent explained her options and helped negotiate a better premium that she realized how critical understanding filed rates can be.

Scenario 3: An agency failed to stay updated on a carrier's latest filed rates. As a result, they provided outdated information to a client, leading to confusion and possible E&O exposure.

Limitations and Common Mistakes

"Filed rates" are not negotiable in the same sense as many other consumer prices.

However, insurers often have varying rates, and there can be discounts available.

Clients often assume that the quoted rate is the best or only rate, leading to overpriced policies.

Agents may not fully understand an insurer's entire range of filed rates, leading to less-than-ideal policy recommendations.

How to Explain Filed to Clients

Personal Lines client: Filed rates are the prices for insurance that companies have officially told the state they'll charge. Just like how you file your taxes, insurance companies file their rates too.

Small Business owner: Think of filed rates as the menu prices at a restaurant: they're the main costs, but you can usually get discounts if you know what to ask for.

CFO or Risk Manager: Filed rates are a part of the policy form that insurers submit to state boards for approval, which then contribute to the premiums charged for the policy.